Broker’s Edge – Smarter Real Estate Lending
By Steven M. Hook, MBA, CMPS, CMA
Residential & Commercial Mortgage Advisor – San Francisco Bay Area

Holiday shopping for friends and family shouldn’t feel overwhelming—but it often is.

Shopping for a mortgage shouldn’t feel overwhelming either—but for many borrowers, it is. Between online rate ads, conflicting advice from friends, and fast-moving market conditions, it’s easy to make decisions that unintentionally cost time, money, or even the home or property itself.

As a San Francisco mortgage broker working with homebuyers, small business owners, real estate investors, and commercial clients throughout the Bay Area, I’ve seen the same misunderstandings surface again and again. The good news? These mortgage rate shopping mistakes are completely avoidable when you understand how mortgage pricing really works behind the scenes.

Whether you’re preparing to buy a property (residential home or commercial building), refinance, or compare mortgage lenders, here are the Top 10 Mistakes to Avoid When Shopping Rates & Mortgage Lenders—and what to do instead.

1. Comparing Rates Without Comparing the Costs Behind Them

Many borrowers look only at the interest rate—not realizing that rates and fees are tied together.

A lender offering a lower rate may be charging thousands for discount points, third-party reports, legal fees, and other closing costs, while another lender may offer a slightly higher rate with low to zero points—and provide an overall lower total cost of the loan.

This is one of the most common mistakes people make when searching “best mortgage rates” or “how to compare mortgage lenders.”

Smart Tip:
Always request a side-by-side comparison that includes:

  • Rate
  • Estimated APR
  • Lender fees
  • Discount points
  • Third Party Reports (Appraisal is most common for all property types. Environmental Reports are very common for Commercial properties)
  • Total cash-to-close

That’s the only true apples-to-apples comparison.

2. Assuming a Rate Quote Is Valid for More Than a Few Hours

Mortgage rates can move multiple times per day. A quote from the morning can be outdated by lunchtime—especially in volatile markets like California.

On the commercial side, many lenders don’t even offer a rate lock until the loan is fully approved or very close to closing.

Smart Tip:
When comparing lenders for residential real estate, gather your quotes within the same 1–2 hour timeframe so you’re truly comparing comparable offers. For commercial loans, ask specifically when the rate can be locked and under what conditions. As many commercial loans can take 60 days or longer to close, that opportunity to rate lock might be far ahead in the future.

3. Giving Different Information to Each Lender

A rate quote is only as accurate as the information used to generate it.

If one lender is told your income or the building’s income is $150,000 and another is told $135,000, your quotes will not match. The same applies if you describe the transaction differently—purchase vs. refinance, owner-occupied vs. investment, primary residence vs. second home.

Smart Tip:
Use a prepared income / asset / credit summary and give identical details to every lender you contact.

This consistency matters greatly for residential lenders and often for commercial lenders as well, even if some commercial banks are more focused on property income and DSCR than on personal income.

4. Not Knowing That Credit Score Changes Alter Pricing

Mortgage pricing is highly sensitive to credit scores for residential real estate loans, and Net Operating Income, as well as consistent financials for commercial real estate loans.

A five-point drop can move you into a different pricing tier and raise your rate with many residential lenders. In some cases, it can even cause a loan denial or prevent you from qualifying for a specific program if your score drops below a critical threshold. On the commercial side, some lenders still care very much about personal credit, especially for smaller balance and owner-user loans.

Smart Tip:
When rate shopping, avoid:

  • New credit inquiries
  • Large credit card purchases
  • Co-signing for anyone
  • Closing old accounts

Maintain stability until your loan is locked and, ideally, until the transaction closes.

5. Shopping Rates Before a Lender Reviews Your File

Many online lenders quote “best-case scenario” pricing without reviewing income, assets, property details, or guidelines. Once underwriting sees the full picture, the rate—and sometimes even the approval—can change dramatically.

This applies to both residential and commercial real estate financing, and is especially risky for:

  • Self-employed borrowers
  • Real estate investors
  • Borrowers with layered or variable income
  • Commercial and mixed-use properties

Smart Tip:
A real quote comes after your loan officer evaluates:

  • Tax returns
  • Paystubs or profit-and-loss statements
  • Bank statements
  • Credit
  • Property information

For residential loans, this often leads to a Conditional Loan Approval (CLA). For commercial real estate, it may begin with a Letter of Interest (LOI) or term sheet. Anything prior to this is largely marketing.

6. Assuming All Lenders Follow the Same Guidelines

Not all lenders interpret or apply the same rules the same way.

For Residential Home Loans:
FHA, VA, Conventional, Jumbo, and Portfolio guidelines vary from lender to lender. Some allow higher debt-to-income ratios, some don’t. Some welcome complex self-employed income, others avoid it.

For Commercial Real Estate Loans:
Owner-user and SBA real estate loans are somewhat standardized, but there are many nuances and overlays. Investor commercial loans can have even more variance—different DSCR requirements, property restrictions, prepayment penalties, and seasoning rules—far beyond the borrower-focused guidelines in residential lending.

Smart Tip:
Choose a lender—or better yet, a mortgage broker—who works with multiple loan products and lenders, not one restricted to a single in-house platform. This applies to both residential and commercial real estate.

7. Comparing Advertised Rates That Require Discount Points

Many online “best rate” ads require the borrower to pay 1–3 discount points to obtain that rate.

Borrowers often don’t realize they’re comparing a “buy-down rate” with points to a “no-points rate” from another lender. The same principle applies to some commercial lenders who quietly embed significant fees or yield requirements in their structures.

On the commercial side, there’s another twist:
Since the failure of two large banks in the San Francisco Bay Area in recent years, many commercial real estate lenders now require deposit relationships beyond basic operating accounts. This can be as high as 10% of the loan amount. That means a lender can ask for a $100,000 deposit relationship on a $1,000,000 loan. There are sometimes workarounds for smaller commercial investor properties and certain SBA real estate loans—but they’re not always obvious.

Smart Tip:

Ask every lender:

  • “Does this rate require discount points? If so, how many and what’s the total cost?”
  • “Are there additional requirements like deposit relationships, compensating balances, or cross-collateralization?”

Understanding the true cost of funds is key—especially for long-term investors and business owners.

8. Focusing Only on the Monthly Payment Instead of the Long-Term Strategy

The lowest payment today doesn’t always produce the lowest cost over time.

For example:

  • Paying points may save thousands if you keep the home or building long enough.
  • A 5/6 ARM may outperform a 30-year fixed depending on your timeline and risk tolerance.
  • Temporary buydowns can ease payment shock without locking into higher long-term rates that you may refinance later.
  • Interest Only loans are very popularwith residential and commercial real estate owners, but there can be serious consequences if there is no proper mortgage planning in place.

This is where mortgage planning matters more than rate chasing.

Smart Tip:
Start with your goals:

“How long will I keep this home, investment building, or owner-user property? What matters most—monthly payment, flexibility, or long-term cost?”

A loan officer who acts as a Mortgage Planner can help you evaluate the right structure, not just quote a rate. You can’t always expect a bank loan officer to offer that level of consultation or help you perform the analysis and due diligence.

9. Believing All Pre-Approvals Are Created Equal

Some lenders issue “pre-approvals” or “pre-qualifications” without verifying income, assets, or credit.

These flimsy letters can fall apart when the buyer is already in contract—which is the worst possible time to find out.

In my marketplace, I’ve seen many banks and other lenders re-trade on their pre-qualification or pre-approval once the file reaches underwriting. These “letter failures” have, frankly, helped my business over the years—because I’m often called in to step in, stabilize the situation, get the loan approved and closed.

Smart Tip:
While you can (and should) ask for a fully underwritten pre-approval or a thoroughly verified pre-qualification, it almost always comes down to trust:

  • Do you know, like, and trust that loan professional?
  • Do they ask detailed questions and explain the “why” behind their recommendations, as well as questions about your situation?

In my one-hour Pre-Application Discovery Calls, I ask clients to get started with me only after they’ve done their due diligence and feel confident trusting me with their loan application.

My Google and Yelp reviews from happy clients serve as my social proof—not just my claims.

10. Choosing a Lender Based on Speed Alone

Quick is good.
Accurate is better.
But quick + accurate + strategic is what truly closes loans.

The wrong lender can:

  • Create delays
  • Misquote pricing
  • Mishandle documentation
  • Fail to communicate with buyers, sellers, and Realtors

On both the residential and commercial sides, having a lender you trust to know what they’re doing, communicate clearly, and deliver results is what closes loans—and preserves relationships.

Smart Tip:
Your lender should feel like a trusted partner, not just a transactional salesperson. Ask yourself: “Would I refer a family member or best client to this person?”

Final Thoughts: Be an Informed Borrower Before You Rate-Shop

The mortgage process has many moving parts—underwriting, guidelines, credit tiers, appraisal requirements, income calculations, and market timing all influence your final rate and terms. Knowing how mortgage rates work and what questions to ask can save you money, prevent surprises, and streamline your closing.

If you’re starting the mortgage process—or want a strategic review of your current loan options—I’m here to help.

✔ Residential Loans
✔ Commercial & Investment Property
✔ Construction & Construction-to-Perm
✔ Rural, Portfolio, and Private Money Solutions

Let’s make your next real estate move smarter, faster, and more financially sound.

Next time, I will outline what is covered in that consultation call.

📩 Contact me anytime to schedule your 1-hour Pre-Application Discovery Call:

🔎 BROKER’S EDGE – Smarter Real Estate Lending
🤝 Looking out for your Best Interest, and Helping Homeowners, Investors & Small Business Owners since 1990

📞 Steven Hook | Residential & Commercial Mortgage Broker

📱 415-260-9376 | 📠 415-449-3428

🎓 MBA | CMPS | CMA

👉 Schedule a Call
🌐 SanFranciscoLoanOptions.com
🌐 shook@Uamco.com or smhloans007@gmail.com

🆔 NMLS #303544   Ca DRE #00987187

This content is provided for informational purposes only and is not a loan commitment or guarantee of financing. Loan programs, rates, terms, and conditions are subject to change and borrower qualification. Individual results may vary.

Posted in blog, First Time Real Estate Buyers, Tips and Tricks, Uncategorized